Savings Not a Top Concern for Chinese, MasterCard Survey Says

Despite a slowing global economy, higher unemployment, and grim outlook for the Year of the Ox, Chinese consumers are the least concerned about saving in the Asia Pacific region. A new report from MasterCard says their strong willingness to spend is backed by the country's economic momentum. The Shanghai Daily reports:

About 77 percent of respondents on the Chinese mainland said they were concerned about saving while the average for the region was more than 87 percent.

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About 58 percent of mainland respondents saved for a rainy day while the figure for the region as a whole was more than 65 percent.

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Only 5 percent of mainland respondents under the age of thirty were concerned about saving for retirement.

But the figure rose to 100 percent for those divorced or widowed. MasterCard surveyed about 6,000 people in 14 markets in the Asian Pacific region in September and October. The report found Chinese mainland households were willing to spend, in contrast to the traditional image of saving almost every penny possible for medical care and retirement, according to the Shanghai Daily.

The common misperception in the West is that Chinese consumers save too much. Corporate savings were the major part of China's mounting savings, explains Hedrick Wong, at economic advisor at MasterCard. With slowing global demand hitting the export sector hard, Beijing is very concerned about generating enough jobs to keep the populace satisfied. Along with slashing interest rates, it has announced a $586 billion fiscal package to stimulate the economy, with a major focus on infrastructure investment.

Despite the free spending ways many Chinese consumers, many multinationals in the country are downsizing or considering closing up shop all together. Citing fast-climbing labor costs and pesky production quality problems, a growing number of German companies are doing an about face and pulling their manufacturing operations out of China. In August, the Association of German Engineers (VDI) estimated that one in five of the approximately 1,600 German companies with presences in China were planning to pull out of the market.

While Goldman Sachs predicts China’s GDP will grow by six percent in 2009, it feels much worse for many Chinese workers who thought the economy would grow at double digits indefinitely. Michael Pettis, professor of finance at Guanghua School of Management at Peking University is quoted in Businessweek as saying,

If China makes the same mistakes the U.S. did, and thinks they can export their way out of this problem and don't have to massively boost domestic demand, then we have a repeat of the 1930s. So far China is acting like it thinks it can export its way out of this problem.

“I am very, very worried," says Pettis, who is predicting that China's growth will fall below 7% in 2009.

Comments

[Monkey Man:]

I find it funny that you cite the MasterCard report. For MasterCard to release a gloomy report about consumer spending would be similar to McDonald's coming out with a report admitting that KFC is winning the fast food battle because the Chinese consumer prefers chicken over beef... while true, they won't release such reports since it reflects negatively on their business outlook.

Jan 08 09:53 PM